Smithson Mining operates a silver mine in Nevada. Acquisition, exploration, and development costs totaled $7.0 million....
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Smithson Mining operates a silver mine in Nevada. Acquisition, exploration, and development costs totaled $7.0 million. After the silver is extracted in approximately five years, Smithson is obligated to restore the land to its original condition, including constructing a wildlife preserve. The company's controller has provided the following three cash flow possibilities for the restoration costs: (1) $640,000, 25% probability; (2) $690,000, 50% probability; and (3) $790,000, 25% probability. The company's credit-adjusted, risk-free rate of interest is 6%. What is the initial cost of the silver mine? Note: Use appropriate factor(s) from the tables provided. Do not round intermediate calculations. Enter your answers in whole dollars. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) Table or calculator function: Restoration Costs Acquisition, exploration and development Initial Cost PV of $1 5 n = i= 6% $ 0 Smithson Mining operates a silver mine in Nevada. Acquisition, exploration, and development costs totaled $7.0 million. After the silver is extracted in approximately five years, Smithson is obligated to restore the land to its original condition, including constructing a wildlife preserve. The company's controller has provided the following three cash flow possibilities for the restoration costs: (1) $640,000, 25% probability; (2) $690,000, 50% probability; and (3) $790,000, 25% probability. The company's credit-adjusted, risk-free rate of interest is 6%. What is the initial cost of the silver mine? Note: Use appropriate factor(s) from the tables provided. Do not round intermediate calculations. Enter your answers in whole dollars. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) Table or calculator function: Restoration Costs Acquisition, exploration and development Initial Cost PV of $1 5 n = i= 6% $ 0
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The initial cost of the silver mine is not directly relevant to finding the total expected cost cons... View the full answer
Related Book For
Intermediate Accounting
ISBN: 978-0077400163
6th edition
Authors: J. David Spiceland, James Sepe, Mark Nelson
Posted Date:
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